Topic: Corporate Finance

eBook – Introduction to Corporate Finance

We are glad to announce that our new ebook “Introduction to Corporate Finance” is now available on Amazon Kindle Stores. This Kindle ebook introduces the reader to the world of corporate finance and teaches the fundamentals of how corporates make their...

Degree of Total Leverage

Using the formulas for Degree of Operating Leverage (DOL) and Degree of Financial Leverage (DFL), we can calculate the degree of total leverage (DTL) for the firm as follows: In the above formula, you can observe that if there are no fixed operating costs and fixed...

Degree of Financial Leverage

Financial leverage arises when a firm has fixed financing costs in its income stream. The presence of financial leverage magnifies the effects of changes in sales to the firm’s net earnings. Sources of financial leverage are primarily debt and preferred stock. The...
Calculating Profitability Index in Excel

Calculating Profitability Index in Excel

Profitability index is an important measure in project finance to decide whether to invest in a project or not. It is calculated as the ratio of present value of a project cash flows and the initial investment. If the profitability index is greater than 1, the project...

Problems with Calculating WACC

The weighted average cost of capital (WACC) is the cost of capital a company expects to pay to all its stakeholders including equity and debt-holders. First we calculate the marginal cost of capital for each source of capital such as equity and debt, and then take the...

Why Do Firms Issue Bonds Abroad?

Corporate bond issuers in emerging economies in Asia have often had a choice between an onshore market and an offshore one. Since 1998, however, many of these issuers have increasingly turned to the onshore market. This paper provides lessons from onshore and offshore...

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